Sunday, April 12, 2015

A Tale of the House and Senate Budgets

With both the Senate and House budgets now seeing the light of day, there is time to compare and contrast them both. The non-partisan budget website run by the Legislative Evaluative and Accountability Program and the Office of Financial Management website compares the House and Senate budget's here.  That graphic goes deep into the weeds and develops a side by side fiscal comparison between the two proposals.  The key differences in the budgets are as follows:  

1) How revenue is generated for each proposal
2) Funding Higher Education
3) The approach to teacher and state employee cost of living increases
4) Level and extent given to funding capital dollars for school construction.

The Washington State Budget and Policy Center released this graphic comparing the House and Senate Education and Higher Education Budgets.  Although there are substantial increases to K-12 education funding in both budgets, neither addresses the critical compensation segment of McCleary nor the local funding question.  The court has noted that the state is responsible for funding basic education, leaving local levies to cover “extras.”  Since our local levies fund a significant portion of teacher compensation, the legislature may be expected to come up with a part of that solution to satisfy the mandate of the court.  While there is some agreement on the education portion of the budgets, cuts in other directions, revenue, and how to approach higher education are far different in each.
One of the major points of contention is the revenue package.  The basic difference is that while the House develops extensive additional revenue options including a capital gains tax, the Senate only allows for closing tax preferences that are currently expiring.  The policy center shared this graphic for comparison between the House and Senate Revenue side.  As a reminder, the PTA is on record endorsing a new revenue budget - the proposal widely supported at legislative assembly highlighting the goal of funding McCleary is found here.  

Another difference is in Higher Education where the House offers to freeze tuition; the Senate takes that a step further by actually reducing tuition by 25% over the biennium.  The main concern with the Senate proposal is how the state answers the value of the GET pre-paid tuition programs that assumed a different cost for tuition.  These parents would be penalized under the budget plan as drafted and actually paying more for their investment than parents who did not participate.  Actuarial staff in the House, Senate, and Governor’s office is currently trying to come up with a solution that may involve a "stock split" for those parents who invested early to ensure that everyone benefits from the change.

The other challenge to the Higher Education proposal is the cost.  Under the Senate plan, the cost of living adjustments for most state employees is reduced dramatically.  As the economy picks up, departments are seeing more and more talent leaving state employment as salaries over the past decade have not kept up with the market.  In addition, health insurance costs have further eroded the benefits that employees have received leading, again, to an increase of talent leaving state service. The senate proposal attempts to address this challenge to the lowest paid workers by funding a base adjustment of $1,000 per year for the next two years.  The question is, however, whether or not that solution will be enough to stop the "brain drain" in the state and if it is legal.  Washington state law provides for the Governor to negotiate labor contracts and the legislature to vote them up or down. The law gets murky when the legislature offers up its own proposal.  A comparison metric on the two points of view is found here.

The legislature now faces the key test - can they resolve the big issues before the close of the session and, maybe, get to the marquee issue of Levy and Teacher Compensation, before the end of the session?  Time will tell.  Regardless, the PTA believes that if special session is necessary to resolve these issues that have over 50 years in the making, we should support our legislators taking additional time.  Sometimes, we need to let our people go into overtime to get the best result for our children. More next week!

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